Attracting international investors in an uncertain climate
5 min read
15 December 2016
As Giles Fuchs looks for the capital that will finance the next stage of his company's growth, he explains why international investors will play a big part.
My sister and I have a dream target for our business – to have ten serviced office buildings in central London within the next five years. With six London-based office buildings already operating successfully, we are keen to find the next building to add to our portfolio. Viewing buildings and considering new central locations is currently keeping me busy, and got me thinking about the role of international investors.
What makes Office Space in Town unique is that we operate a freehold model – owning our office buildings outright, as opposed to the leasehold model which is commonplace amongst serviced office providers. The advantage of this is that we benefit from the income streams derived from operating the business – such as income from meeting room hire – as well as the appreciation of the square foot value of the building. In order to secure the quality and location of building that we are looking to acquire, we need to attract funding from investors.
This month, I’ve been presenting the opportunity that the company’s business model offers to potential investors. Yet, attracting finance in the current investment climate has both its advantages and its challenges.
There’s no denying that the aftermath of Britain’s vote to leave the EU has prompted uncertainty in the UK, particularly in the commercial property market. Despite the reticence of investors in the immediate aftermath of the referendum, I am confident that the UK will withstand the uncertainty, and that commercial real estate sector will continue to have a strong appeal to investors beyond Europe. Indeed, recent research has shown that 38 per cent per cent of institutional investors still see London as the most attractive city for real estate investment.
Businesses like ours, looking for funding, should take comfort from this.
The UK’s planned departure from the European Union means an open door for new alliances – something that is clearly welcomed by the international investors with whom I have been speaking. We have already seen in recent weeks that Chinese investors are increasingly eager to invest in UK commercial property and are positive about growth prospects in the sector. Middle Eastern investors, who typically have longer-term investment strategies and a preference for wealth preservation and high income-producing assets, continue to look to the UK as a leading investment opportunity.
The decline in sterling since the EU has also increased the appeal of UK real estate. The pound’s fall against the dollar to its lowest level in over thirty years has generated a hugely favourable climate, generating immediate value for investors looking to purchase UK property.
Furthermore, following the election in the United States, we may see the interest of international investors turn to the UK, as they wait to see what shape Trump’s economic policies will take.
Alongside this backdrop, we should be sure to point out to potential international investors the strength of our sector. Demand for serviced offices is at an all-time high, many of our offices are operating at nearly full capacity and enquiries at our buildings following the Brexit vote has soared – as businesses look for flexibility in contracts until the future is clearer.
I am confident, as we continue our search for our new building, that we have an opportunity to take advantage of the uncertainty when approaching investors and that the UK will remain a destination for international investors for many decades to come.